| Aditya Birla Health Services Limited | ||||
| Rating outlook revised to 'Positive'; Rating reaffirmed | ||||
| Rating Action | ||||
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| 1 crore = 10 million | ||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has revised its rating outlook on the long-term bank facilities of Aditya Birla Health Services Limited (ABHSPL) to ‘Positive’ from 'Stable' while reaffirming the rating at ‘CRISIL BBB+’.
The outlook revision takes into account the expected improvement in the business risk profile of the company supported by increased occupancy at its IPD unit. The inflow of surgical patients, which had declined in fiscal 2021 on account of Covid-19 and the nationwide lockdown to contain its spread, has started to increase in fiscal 2022. The financial risk profile of ABHSPL will also improve, backed by rising cash accrual, expected at Rs 15-20 crore in fiscal 2022, low debt obligation of Rs 6.44 crore and cash surplus of around Rs 18 crore.
Revenue is expected to grow 30-35% in fiscal 2022 driven by increase in operational beds from 350 to 500 as well as better occupancy. While the operating margin had declined in fiscal 2021 because of the lockdown and low occupancy, the company’s ability to revert swiftly to operational stability resulted in improved performance in the first half of 2022. Profitability should improve in fiscal 2022 on account of better absorption of fixed cost.
The rating reflects the significant support ABHSPL receives from the Aditya Birla group during exigencies as evidenced by the reissuance of preference capital of Rs 90 crore in 2019. The rating also factors in the company’s moderate operating efficiency and healthy financial risk profile. These strengths are partially offset by geographical concentration in revenue, exposure to intense competition and modest scale of operations |
Analytical Approach CRISIL Ratings has considered the preference share capital infused by the Aditya Birla group into ABHSPL as 100% equity as per its rating criteria. |
Key Rating Drivers & Detailed Description Strengths Strong support from the promoter: CRISIL Ratings believes the Aditya Birla group will continue to support ABHSPL during exigencies. Furthermore, ABHSPL's hospital has a healthy brand recall and enhanced financial flexibility owing to the Aditya Birla brand.
Healthy financial risk profile: ABHSPL has a healthy financial risk profile, supported by adequate networth of Rs 73 crore and healthy gearing of 0.5 time as on March 31, 2021. The company has moderate debt, with obligation of Rs 6.4 crore against expected net cash accrual of around Rs 15-20 crore in fiscal 2022. Debt protection metrics were impacted by the moderation in performance in fiscal 2021, with interest coverage and net cash accrual to debt ratios being negligible, but should improve considerably as performance has started to improve significantly in fiscal 2022. The financial risk profile is expected to remain healthy over the medium term with steady accrual and moderate capex plan.
Moderate operating efficiency: Revenue is expected to continue to grow at a steady pace, aided by increase in occupancy of beds, ramp-up of the state-of-the-art oncology wing, and addition of facilities such as Neuro Navigation and Di Vinci (robotic arms) and upgrade of CT and MRI facilities and operation theatres. Hence, operating margin should improve to 9-10% over the medium term from low levels in fiscal 2021. Past investments, expected upgrade of equipment, and addition of equipment/specialities will accrue benefits over the medium term and help improve the return on capital employed.
Weaknesses Geographical concentration, susceptibility to intense competition, and price-sensitive customers: Geographical concentration in Pune restricts the company’s target customer base and renders it vulnerable to the dynamics of a single market. The hospital remains vulnerable to increased competition arising from the entry of any big player in the region. CRISIL Ratings believes the geographical concentration, susceptibility to intense competition, and price-sensitive customers will continue to constrain ABHSPL’s business risk profile.
Modest scale of operations: Despite its established regional presence, ABHSPL's scale of operations remains modest, as indicated by revenue of Rs 150 crore in fiscal 2021. |
Liquidity: Adequate Liquidity should remain adequate. Net cash accrual, expected at Rs 15 crore and Rs 17 crore in fiscals 2022 and 2023, respectively, should sufficiently cover debt obligation of Rs 6.44 crore and Rs 4.45 crore, respectively. Liquidity is supported by expected support from the Aditya Birla group and moderate utilisation of bank lines of Rs 15 crore over the 12 months through September 2021. Unencumbered cash and equivalent stood at Rs 18 crore as on March 31, 2021. |
Outlook: Positive CRISIL Ratings believes ABHSPL’s credit risk profile will improve over the medium term, driven by improving operating performance, prudent capital spending and steady accretion to networth. Furthermore, the company will continue to receive need-based financial support from its promoter, the Aditya Birla group. |
Rating Sensitivity factors Upward Factors:
Downward Factors:
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About the Company ABHSPL, a part of the Aditya Birla group, was incorporated in April 2001 and commenced operations in the second half of fiscal 2007. Almost all of the company’s equity share capital is owned by Birla Group Holdings Pvt Ltd, while preference share capital of Rs 90 crore is subscribed to by the Aditya Birla group companies.
ABHSPL provides medical services through Aditya Birla Memorial Hospital in Pimpri-Chinchwad, near Pune. The company has positioned itself as an affordable and comprehensive healthcare service provider. The hospital has 500 beds. Its oncology unit commenced operations in November 2017.
ABHSPL’s performance improved significantly in the first half of fiscal 2022 as reflected in revenue of Rs 111 crore and profit before tax and depreciation of Rs 20.6 crore. |
Key Financial Indicators
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Any other information: Not applicable |
| Note on complexity levels of the rated instrument: CRISIL Ratings' complexity levels are assigned to various types of financial instruments. The CRISIL Ratings' complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL Ratings' complexity levels for instruments that they consider for investment. Users may also call the Customer Service Helpdesk with queries on specific instruments. |
Annexure - Details of Instrument(s)
*Interchangeable with letter of credit and bank guarantee up to Rs 2 crore |
| Annexure - Rating History for last 3 Years | |||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | |||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | |||||||||
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Criteria Details
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